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Look Ahead to 2032, at the Very Least

That’s because the math shows that it’s not only profits that compound over time. Costs, do, too. Investors need to watch out for themselves, unfortunately. Mr. Bogle warned that the costs of stock trading and investment fees can easily ruin your prospects for a comfortable retirement.

While the past provides no guarantees for the future, it suggests a course of action: holding stock index funds for their higher returns and bond funds for reliability and for offsetting the ups and downs of the stock portfolio. How much and what kinds of each — the fancy name for this is asset allocation — are critical and individual questions.

An investor in her 20s, who could well be in the work force until 2072, might want to put 100 percent of her investment money into a broad stock market index fund and just add to it year after year. Consider that since the start of 1976 (when Vanguard began marketing the first index fund), the S&P 500, including dividends, has returned more than 18,000 percent.

I’d also invest outside the United States. Economic power is becoming increasingly dispersed. For the rest of this century, global investing, including allocations to emerging markets, seems essential for a truly diversified portfolio.

Over the decade ahead, according to Vanguard’s projections, neither stocks nor bonds are likely to exceed single-digit returns, largely because most securities are already expensive. Vanguard expects that stocks outside the United States are likely to do better than domestic ones, and bonds are expected to lag stock returns by two to three percentage points annually.

If your horizon is short, you may need to cut investment risks by paring down on stocks. The decision is personal. My own idiosyncratic portfolio’s allocation is somewhere close to 60 percent stocks and 40 percent bonds.

Because I may need to tap some of that money before 2032, I hang on to a substantial dollop of bonds, even though this has been a mediocre stretch for them. The iShares Core US Aggregate Bond ETF, which tracks the investment grade U.S. bond market, lost 1.8 percent last year — trailing the returns of the Vanguard S&P 500 ETF, which tracks the S&P 500 stock index, by a whopping 27 percentage points.

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